Oil prices dipped on Wednesday, with Brent crude futures around $50 per barrel, as fuel markets remained oversupplied, although tension in the Middle East and falling US inventories lent some support.

Brent crude futures were at .08 per barrel at 0504 GMT, down 4 cents from their last close. (Reuters)

Oil prices dipped on Wednesday, with Brent crude futures around $50 per barrel, as fuel markets remained oversupplied, although tension in the Middle East and falling US inventories lent some support. Brent crude futures were at $50.08 per barrel at 0504 GMT, down 4 cents from their last close. Brent is 7 percent below its open on May 25, when OPEC said they, along with producers outside of the group such as Russia, would extend their oil output cuts through to the first quarter of 2018.

US West Texas Intermediate (WTI) crude futures were at $48.14 per barrel, down 5 cents from the previous close, and 6 percent below their May 25 open. Traders said an ongoing fuel glut was keeping prices under pressure despite a pledge by Organization of the Petroleum Exporting Countries (OPEC) and other producers to cut almost 1.8 million barrels per day (bpd) of output.

“Disappointed that the oil cartel and Russia could not come up with a bolder plan to reduce the global crude surplus, market participants have been selling into every bounce,” said Fawad Razaqzada, analyst at futures brokerage Forex. World fuel production and consumption is roughly in balance, at almost 98 million bpd, although inventories remain bloated, the U.S. Energy Information Administration (EIA) said on Tuesday.

“Where oil (price) ultimately goes is going to be driven by inventories,” said Greg McKenna, strategist at AxiTrader, another futures brokerage. OPEC’s efforts to tighten the market could be undermined by U.S. production &lt;C-OUT-T-EIA&gt;, which the EIA said could hit a record 10 million bpd next year, up from 9.3 million bpd now. That would nearly match the output level of top exporter Saudi Arabia.

In the near-term, however, the market was supported by escalating tensions in the Middle East and by signs of a gradual drawdown of bloated U.S. fuel inventories. A campaign by leading Arab nations, including Saudi Arabia, Egypt and the United Arab Emirates, to isolate Qatar is disrupting trade, including oil.

“Port restrictions on Qatari flagged vessels are going to cause loading disruptions,” said Jeffrey Halley, analyst at brokerage OANDA. “That said, the disruptions are seen as inconvenient rather than systematic and thus will maybe only put a floor on crude in the short-term rather than starting a panic rally,” he added.

In the United States, crude inventories fell by 8.7 million barrels in the week to May 26, data from the American Petroleum Institute showed late on Tuesday. Official inventory data from the EIA will be published later on Wednesday. “Any further sharp reductions in US stocks could put a floor under oil prices in the short-term,” said Razaqzada.